Bank of England Policy Unchanged

March 4, 2010

To nobody’s surprise, the Monetary Policy Committee announced a decision to leave its bank rate at 0.5%, where such has been for the past year, and not to increase its asset purchase program beyond the Gbp 200 billion limit that was reached in January. Minutes of today’s meeting due March 17 will likely show another unanimous 9-0 vote behind today’s decision. Data since the February meeting four weeks ago has on balance been a bit more encouraging (see earlier preview), and the committee is predisposed to a wait-and-see posture for now rather than fine-tune the economy amid continuing high uncertainty surrounding the outlook. By pausing, officials will be better able to gauge the full impact of previous monetary easing, and they believe the very accommodative stance will impart continuing support. All this is based on prior information conveyed to the public. A statement released today merely tells what was decided, the release date of the minutes and the history of how policy got to its present settings. There is no discussion about the reasons for today’s action or commentary on the committee’s latest thinking. Investors will now turn their attention to the ECB monthly policy announcement at 12:45 GMT and press conference, which begins 45 minutes later.

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